Technology Adoption and Leapfrogging: Racing for Mobile Payments

Mobile payments are reshaping the global payment landscape with some developing economies leapfrogging advanced economies in adoption. We build and estimate a dynamic model of sequential payment innovations—progressing from cash to card to mobile—to explain this pattern. The model matches cross-country payment technology adoption patterns and shows how advanced economies’ early success in adopting card payments dampens subsequent mobile payment adoption. Extending the framework to a two-sided market with price coherence, we show that payment externalities justify policy intervention: Promoting mobile payment adoption and usage (e.g., via subsidies or price differentiation) enhances welfare, especially in developing economies.

This paper was accepted by Lin William Cong, Virtual Special Issue on Digital Finance.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.00781.